Monday, July 19, 2010

Its the Economy, Stupid...and we are mad

Apparently the economy has been growing for about 4 quarters, but no one seems to have noticed - except maybe Wall Street traders who more than made up for some very steep losses in 2008 and 2009. We didn't notice because we stopped looking at our 401k (which felt like a 201 k). And because the companies, and those who run them have to make money, and more importantly the chief execs need to justify their bonuses, they have no choice but to keep their job rosters to a minimum - there is very anemic job growth. It is going to remain that way for a while. In fact it will be 2017 before we reach 4.5 % unemployment assuming we grew 300 k jobs a month for the next 7 years (something not seen since Clinton era). So we feel very uncomfortable with our situations and this goes to most of us. Unless you run something, and something profitable, you are in risk of being replaced.

On top of it, US Govt. wants to tax the wealthy. One argument is they are not taxed enough compared to all other developed nations. Okay, that is true. But they also buy a lot of junk that keeps the economy going, as almost 2/3rds of it depends on consumer spending, a majority of that done by the people making over $500k a year. That is a fact. Now, if at these times you want to tax them - they stop buying the junk they don't need or places they don't need to go. Everyone feels the trickle down effect, and this one is well established and known. But taxes are coming, in every way possible and shape (even the death tax is back, be prepared to a bunch wanting Dr. Kevorkian to be back in action just till Dec 31, 2010). And it is going to effect overall economic growth - there no two ways about that either.

Is there a silver lining then? Well, yes and no. Had US not indulged in a poorly decided war in Iraq and avoided the excesses, all this new regulation would not be a bad thing. But right now, it is coming at the worst possible time. The only thing going for the US, is that the developed counterparts are not doing that hot either. So far so good. Misery loves company here. Even England, is now prepared to return the government to the local provinces. Even China is forced to look inwards because the rich people and the Walmart crowd in no longer ready to but all their manufactured junk indiscriminately.

Life will not return to the ga ga 1990s ever, but feel more like 1937. Only a huge war (that is not of our choice) will get us out of this. Otherwise, the ups and downs will both be muted - no huge disasters, but death by a thousand cuts, while feeding you honey drops.

Since we care only about us, we don't like that uncertain feeling. In the end, it is the Economy, stupid.